{"id":10339,"date":"2016-11-04T01:19:34","date_gmt":"2016-11-04T05:19:34","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/weathering-the-storm-kleiner-perkins-and-the-tragedy-of-clean-tech-vc\/"},"modified":"2016-11-04T01:19:34","modified_gmt":"2016-11-04T05:19:34","slug":"weathering-the-storm-kleiner-perkins-and-the-tragedy-of-clean-tech-venture-capital","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/weathering-the-storm-kleiner-perkins-and-the-tragedy-of-clean-tech-venture-capital\/","title":{"rendered":"Weathering the Storm: Kleiner Perkins and the Tragedy of Clean-Tech Venture Capital"},"content":{"rendered":"

\"29a5aa128f9a31d66cd97b6e0549e971d6da02cb_1600x1200\"<\/a><\/p>\n

John Doerr, TED 2007<\/p>\n

In March 2007, John Doerr\u2014the legendary partner at storied venture capital firm Kleiner Perkins Caufield & Byers\u2014delivered an impassioned and tearful TED Talk where he laid out the sheer magnitude of challenges and opportunities posed by climate change.\u00a0 Doerr told the crowd, \u201cGreen Technology\u2026is bigger than the Internet.\u00a0 It could be the biggest economic opportunity of the 21st<\/sup> century.\u201d[1]<\/a>\u00a0 Kleiner Perkins, which made a name for itself by investing in internet giants like Netscape, Amazon and Google, had recently committed $100M of its most recent fund to back clean-tech companies, including technologies related to renewable energy sources, biofuels, electric cars, water purification, and air quality.[2]<\/a>\u00a0 Bolstered by major government incentives, VCs began to pile into the space as well, and total VC investment in clean-tech soon increased tenfold\u2014growing from ~$400M a year in the early 2000\u2019s to $4.2B in 2008.[3]<\/a><\/p>\n

\"cleantech-vc\"<\/a><\/p>\n

By 2015, however, interest and activity in clean-tech VC had stalled for a variety of reasons.\u00a0 First, many VCs underestimated the sheer amount of capital and time required to build a successful clean-tech company.\u00a0 The typical venture firm made investments between $10-$50M and often relied on \u201cquick wins\u201d within 3-5 years in order to drive success; by contrast, companies like Bloom Energy (a fuel cell technology company backed by Kleiner) had taken $800M in capital and 15 years of operations to reach scale.[4]<\/a>\u00a0 Investors\u00a0also misunderstood\u00a0the genuine scientific and technical risks clean-tech businesses faced. \u00a0Fisker Automotive (an electric car company also backed by Kleiner) drew in $1.4B of capital without ever bringing a product to into production.[5]<\/a>\u00a0 The clean-tech venture industry\u00a0suffered due to external pressures as well. \u00a0The global financial crisis in 2008 left many funds with an uncertain capital environment, and markets were suddenly less receptive to the IPO and M&A transactions required to return capital to investors.\u00a0 Moreover, competition from inexpensive Chinese solar panels and the shale gas boom in North America made many projects in the renewables space economically unviable.[6]<\/a><\/p>\n

As a result, Kleiner Perkins\u2019 clean-tech portfolio (which had grown to 88 companies by 2013) was struggling, and investments like Fisker were on track to become among the biggest venture capital losses in history. \u00a0To add to its troubles, industry experts suggested that Kleiner\u2019s focus on clean-tech had caused it to miss out on the early rounds of consumer web companies like Twitter and Facebook, which drove outsized returns for competitors like Benchmark, Accel and Greylock.[7]<\/a>\u00a0 \u00a0The firm\u2019s reputation within Silicon Valley has undoubtedly suffered, and Doerr eventually stepped down as an active investment partner for\u00a0future KPCB funds in 2016.[8]<\/a><\/p>\n

Despite these setbacks, however, the global business opportunity created by climate change has not changed since the first wave of clean-tech VC began.\u00a0 What Kleiner Perkins and other VC firms need to address is how to capture that opportunity. \u00a0There are a few options going forward:<\/p>\n